British Airways says it is hopeful of agreeing a tie-up with its largest US rival American Airlines within weeks.

The talks are taking place alongside negotiations between BA and the Spanish airline Iberia about a possible merger.

With aviation fuel prices at record levels and spending on air travel slowing, airlines are looking for ways to cut costs.

BA suffered an 88% drop in profits between April and June and said the industry faced its worst ever period.

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British Airways and American Airlines already work together as partners in the One World alliance which lets member airlines share flight capacity and airport facilities.

But it is understood that, if agreed, a new deal would see them work much more closely to try to cut costs in areas such as technology, ticketing and administration.

According to the BBC's business reporter Joe Lynam, British Airways is also hoping to secure its status as a global airline well into the future.

Any deal between BA and AA would be subject to regulatory scrutiny.

The two airlines have failed in the past to gain immunity from US competition laws for a tie-up, but British Airways believes that relaxations in regulations under the Open Skies agreement may make this more likely.

Rival Virgin Atlantic has said it would oppose any joint venture between the two transatlantic carriers, saying it would create "a dominant mega-power" on routes between Europe and the United States.

(BBC)

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